Property transaction warning signals of ‘Friday Fraud’

May 4th, 2016by DWFM Beckman

The issue of Fraud in conveyancing transactions is unfortunately becoming far more common with fraudsters’ ability to intercept emails altering the contents and critically altering bank account details such that funds being transferring between solicitors, and from clients to their solicitor, are being misdirected.

This is commonly referred to as “Friday Fraud”, as fraudsters capitalise on the fact that Friday is the busiest day of the week for conveyancers making it easier for a dishonest email redirecting funds to slip into the system.

A recent High Court action has found solicitors acting on both sides of a transaction jointly liable for a £470,000 property fraud.

Critically, no identification documentation linking the fraudster to the property being sold, a freehold house in Wimbledon, was obtained and no enquiries were raised despite the fraudster providing an address that was neither that of the property nor the alternative service address that appeared on the Land Registry Title.

A basic enquiry raised by the Land Registry in writing to the service and property addresses identified the fraud. However, funds were not recovered having been transferred on completion to an account outside of the UK.

There were a number of warning signs in this particular transaction:

The insistence by the fraudster on a fast sale.

Correspondence details differing from the property and service addresses provided in Title documents.

The Property being unencumbered.

Lack of knowledge of Building Works to the property identified in search results.

Withdrawal of contract papers on a prior sale due to the fraudster not wishing to address enquiries raised regarding his overseas employment.

Hindsight is a wonderful thing, and perhaps an experienced property solicitor would have spotted the fraud. However, what is remarkable, and something that will be debated at length, is the fact that the buyer’s solicitors were held liable for the fraudster’s solicitors’ failure to carry out proper due diligence.

Is it fair to suggest that a solicitor must now verify the identity of his counterpart’s client?

This case demonstrates how important it is for property transactions to be dealt with by an experienced solicitor competent to spot the warning signs and to take immediate action to protect the client, or the other professionals he or she is dealing with. This case also highlights the importance of proper money laundering procedures and enquiries being raised directly of one’s client, or on behalf of the buyer confirming ownership and the entitlement to sell.

For more information or for any conveyancing enquiries Matthew Stewart, a Partner in the Property Law department, can be contacted directly at matthew.stewart@dwfmbeckman.com or on 020 7408 8888.